Many people forget about cash investments when it comes to money management. However, investing in cash is an important part of making safer investments.

It may seem strange for a money manager to invest in cash many people do not even realize that you can do such a thing. However, things like certificates of deposit (CDs) and money market accounts are, in fact, cash investments. These may not offer high and glamorous yields, but cash investments are safe investments that can help you build wealth without the same risk of losing it.

Going through the bank

While it is possible to invest in money market accounts through brokerages, you should be aware that in such cases your money is not insured. That can be remedied if you use a bank or credit union for your cash investment. Banks and credit unions that are federally insured protect you against losing money, usually up to $100,000. Most banks and credit unions now offer money market checking and savings accounts, which are often protected. As long as you keep a minimum balance, you can earn money market yields on your accounts. And, of course, you can always get a CD from a bank.

CD Laddering

Creating a CD ladder is a great way to manage your cash investments. When you use CD laddering, you actually make more in interest, plus you have a more flexible and liquid cash flow when it is needed. Here is how it works:

Say you have $15,000 to invest. Divide it up into five portions of $3,000 and invest one in a 1-year CD, one in a 2-year CD and up to a 5-year CD. After one year, you take the entire amount of the matured CD (principal plus interest yield) and put it into a 5-year CD. As each subsequent CD matures, you roll it into a 5-year CD. This way, every year, you are making more in interest and you can keep up with your CD ladder for years, accumulating interest earnings.